The health insurance industry is a prime target for consumer anger - and rightfully so in a lot of cases. Plans are confusing, billing errors are common, and premiums and deductibles seem to rise every year. But while many might think health insurance companies are to blame and are rolling in rich profit margins, that's not the case in many instances.

Profit margins are relatively modest, relative to the rest of the insurance industry, and are generally lower now than before the passage of the Affordable Care Act (ACA). Many health insurance companies - especially new ones without large customer bases - lose money. The real culprit behind rising health insurance costs (which were also on the rise every year even before the ACA) is exorbitant spending. We spend ~$3 trillion a year - significantly more than the next biggest spenders - in a Frankenstein system that's semi-private, semi-public, with countervailing incentives that create undesirable outcomes across the board. For example, there's no real market-pricing for health care services; it's not a market transaction. It's a behind-the-scenes negotiation where the price is made up, depending on the payer - and an understood negotiation margin is built in. That's why you'll see crazy things like a $50 dose of aspirin on your bill; the insurer's not really paying that, but it's a starting point for negotiation with the payers.

Another example: the fees schedule (where hospitals and doctors get paid for each service performed) incentivizes unnecessary testing and services, which drives up cost for everyone.

Yet another example: cost and risk-sharing plan features like deductibles - which are designed to promote efficient use of services by healthcare consumers - can do the opposite. The out-of-pocket cost can encourage people to forgo care until it's a more serious issue - and lands them in the emergency room (which is the most expensive scenario and drives up costs for everyone).

There are a lot of other examples I can point to (e.g., ask any doctor you know about malpractice insurance and what that does to their costs) but you get the point. I'm not saying health insurance companies are innocent bystanders - they've been an active participant in the design and operation of our healthcare system in the US. But there's such a complicated web of policies, regulations, and practices among insurers, providers and the government that it's hard to point to just one factor as the culprit behind our crazy healthcare system and health insurance industry.